Long Depression

The Long Depression was a worldwide price and economic recession, beginning in 1873 and running either through the spring of 1879, or 1896, depending on the metrics used. It was the most severe in Europe and the United States, which had been experiencing strong economic growth fueled by the Second Industrial Revolution in the decade following the American Civil War. The episode was labeled the "Great Depression" at the time, and it held that designation until the Great Depression of the 1930s. Though a period of general deflation and a general contraction, it did not have the severe economic retrogression of the Great Depression.

It was most notable in Western Europe and North America, at least in part because reliable data from the period is most readily available in those parts of the world. The United Kingdom is often considered to have been the hardest hit; during this period it lost some of its large industrial lead over the economies of Continental Europe. While it was occurring, the view was prominent that the economy of the United Kingdom had been in continuous depression from 1873 to as late as 1896 and some texts refer to the period as the Great Depression of 1873–96.

In the United States, economists typically refer to the Long Depression as the Depression of 1873–79, kicked off by the Panic of 1873, and followed by the Panic of 1893, book-ending the entire period of the wider Long Depression. The National Bureau of Economic Research dates the contraction following the panic as lasting from October 1873 to March 1879. At 65 months, it is the longest-lasting contraction identified by the NBER, eclipsing the Great Depression's 43 months of contraction. In the United States, from 1873 to 1879, 18,000 businesses went bankrupt, including 89 railroads. Ten states and hundreds of banks went bankrupt. Unemployment peaked in 1878, long after the panic ended. Different sources peg the peak U.S. unemployment rate anywhere from 8.25% to 14%.

The period preceding the depression was dominated by several major military conflicts and a period of economic expansion. In Europe, the end of the Franco-Prussian War yielded a new political order in Germany, and the £200 million reparations imposed on France led to an inflationary investment boom in Germany and Central Europe. New technologies in industry such as the Bessemer converter were being rapidly applied; railroads were booming. In the United States, the end of the Civil War and a brief post-war recession (1865–1867) gave way to an investment boom, focused especially on railroads on public lands in the Western United States - an expansion funded greatly by foreign investors.

In 1873, during a decline in the value of silver—exacerbated by the end of the German Empire's production of the thaler coins from which the dollar got its name—the US government passed the Coinage Act of 1873 in April of that year. This essentially ended the bimetallic standard of the United States, forcing it for the first time onto a pure gold standard. This measure, referred to by its opponents as "the Crime of 1873" and the topic of William Jennings Bryan's Cross of Gold speech in 1896, forced a contraction of the money supply in the United States. It also drove down silver prices further, even as new silver mines were being established in Nevada, which stimulated mining investment but increased supply as demand was falling. Silver miners arrived at US mints, unaware of the ban on production of silver coins, only to find their product no longer welcome. By September, the US economy was in a crisis, deflation causing banking panics and destabilizing business investment, climaxing in the Panic of 1873.

The Panic of 1873 has been described as "the first truly international crisis". The optimism that had been driving booming stock prices in central Europe had reached a fever pitch, and fears of a bubble culminated in a panic in Vienna beginning in April 1873. The collapse of the Vienna Stock Exchange began on May 8, 1873, and continued until May 10, when the exchange was closed; when it was reopened three days later, the panic seemed to have faded, and appeared confined to Austria-Hungary. Financial panic arrived in the Americas only months later on Black Thursday, September 18, 1873 after the failure of the banking house of Jay Cooke and Company over the Northern Pacific Railway. The Northern Pacific railway had been given 40 million acres (160,000 km2) of public land in the Western United States and Cooke sought $100,000,000 in capital for the company; the bank failed when the bond issue proved unsalable, and was shortly followed by several other major banks. The New York Stock Exchange closed for ten days on September 20.